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Time to buy?

November 4, 2008

So it seems that our system just may be opening the door to allow some buying.

I think we can say definitively that the VIX has been high and turned down now.  Therefore, Bullish on the VIX.  Of course, I don’t really expect this 53 level to hold as a super clean resistance.  It will probably be tested and breached to the upside.  But the breakdown of horizontal and diagonal support on the VIX does give a pretty strong indication that the insane level of fear has likely subsided.

2008-11-04_vix1

On the SPX, we’re still pretty bearish on the bigger time frames, but the short term should probably be called neutral due to a higher high now, though we still have a lower low just behind us.  We broke above the 20 MA a few days back.  So, considering the dramatic drop down to this level in recent months, and the likely snap-back of some sort, I’ll give this part of the Market Posture a Neutral overall.

2008-11-04_spx

Being an intermediate term system I tend to put about 90% emphasis on the green intermediate term market forecast line for the Market Forecast indicator component of our market posture.  As a result, since that line has now left the lower reversal zone and is heading up, I’m calling this bullish.  The longer term sentimental line is still fairly low and pretty much pointed downward, so that’s not so great, but not really surprising.  Notice there was another bullish cluster a few days ago.

2008-11-04_spx-mf

So, looking at all three components together, I’m thinking that Neutral to Bullish is a fair conclusion.  Please feel free to chime in and tell me if you think I’m missing something or am just plain wrong.

Remember that this is intended as an intermediate term system.  Just as with buying a stock on a subjective basis, picking THE bottom is all but impossible.  Likewise, even an automated system is likely to get it wrong now and again.  Nevertheless, this seems as reasonable a method as any to use as a trigger for looking to buy again.  Now it is up to the individual stocks and setups to determine whether or not a buy will take place.

A number of the stocks that I chose for the new list not too long ago have since had their F/E number fall below our standard.  As a result, I’m removing the following:  R, ABT, CME, ROST, NSC, LOOP, BAX.  From those stocks, I think ABT, NSC and perhaps CME and BAX are still work keeping an eye on, as they have held up relatively well compared to the market over the last 6 months. But with so many stocks to choose from, why not keep only the best of the best?

I’ll be refreshing the list with some new ones and possible removing some weak looking stocks.  If you have any suggestions or special requests for inclusion in the list, just let me know.

It looks to my like MYGN is giving a fresh buy signal with heavy volume breaking through resistance today and will be our first purchase order tomorrow morning.  I have to look more closely, though, and work out the details later.  I’m stepping out for a while and will get to this later this evening.

Happy Trading!

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